investable

The financing of infrastructure in Europe
Investing in long-term Europe.
Where do we stand? Progress made and next steps
Thierry DEAU
Founder and CEO of Meridiam
Chairman of the Long-Term Infrastructure Investors Association (LTIIA)
Rome, 12 December 2014
Abundant savings are available globally to fund infrastructure
Institutional
investors have
about USD 83
trillion under
management
(2012 data)
Source: OECD (2014)
Mean allocation in infrastructure is expected to rise from about 1% to about 3% (i.e. additional USD2000bn)
Source: Preqin (2014)
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The Juncker plan: a €315bn investment plan over 3 years to foster investment in Europe
• €21bn (€16bn from the EU budget plus €5bn committed by the EIB) will be pooled in a new European Fund for
Strategic Investment (EFSI) to be managed by the EIB.
o Risk-sharing capacities and attraction of complementary investors should create a 15x multiplier to fund the €315bn+
investment plan.
o Member states can contribute to the EFSI. Contributions can be excluded from the Stability and Growth Pact
constraints.
• The EFSI’s intervention should focus on the riskier parts of projects. This could include in the
infrastructure sector:
o Mitigation of Demand and/or Technology risks;
o Enhancement of public counterparty risks that may constrain project risk.
• To foster capacity building across the European Union, an Investment Advisory Hub leveraging the EIB and
Commission existing initiatives (e.g. EPEC) to support procuring authorities.
• The European Commission committed to improve the investment environment with better regulations to foster
a Capital Market Union and elimination of barriers to investment.
 Not a pure budgetary effort but an investment program with added-value projects to be developed and
financed from different sources, mainly from the private sector
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European projects benefit more and more from bonds financing
Bonds funding projects
by sector – H1 2014
Bonds funding projects
by region – H1 2014
Source : PFI
4
Europe’s challenge is to channel its own savings to added value infrastructure
European infrastructure remains predominantly financed by European savings
RUSSIA
From Asia
NORTH
AMERICA
To North America
EUROPE
ASIA
MIDDLE
EAST
High selffinancing
To Australia
AFRICA
Low selffinancing
LATIN
AMERICA
AUSTRALIA
From
North
America
This requires: (i) high quality administration, (ii) appropriate regulations and (iii) European institutions acting as
catalysts of private funding
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What are the obstacles to increase infrastructure investments?
1. Government must create « investable » projects
• The European energy transition will require funding myriads of
small projects (less than €50m): energy efficiency programs for
public buildings or for private housings, heating networks or smart
grids, etc.
• But attracting institutional investors requires to bundle projects to
reach a €100m minimum size
VNF Dams renovation, France
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Long Beach Courthouse, California, USA
What are the obstacles to increase infrastructure investments?
2. Infrastructure industry must document its performance to be recognized as a
proper asset class and benefit from suitable regulation framework
Equity investment in infrastructure is the “invisible man” of EU Solvency-2
framework: treated as “alternative assets” attracting much higher capital requirements
than property investment
Why a different approach between property and infrastructure: no infrastructure
benchmark
Research is needed to develop such benchmark: key objective of the recently
created Long-Term Infrastructure Investors Association (LTIIA)
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About Meridiam
Meridiam is a global investor and asset manager specializing in public and community infrastructure with a long-term view. Founded in
2005 by current CEO Thierry Déau, the company is an independent player committed to aligning the interests of all stakeholders.
Meridiam develops projects in OECD countries by working closely with public authorities at every stage of their projects, from design
through long-term management (25 years). Meridiam promotes a hands-on approach with a strong focus on technical, environmental and
social aspects as well as an active engagement with project stakeholders. www.meridiam.com
Thierry Déau, Founding Partner, Chief Executive Officer, Meridiam
Thierry Déau is Chairman and Chief Executive Officer of Meridiam, a leading independent global investor and asset manager specializing
in public and community infrastructure founded in 2005.
He began his career in Malaysia with the construction firm GTM International. He then joined France’s Caisse des Dépôts et Consignations
where he held several positions with its investment and development subsidiary Egis Projects, moving up from project manager, then
director of concession projects to his appointment as Chief Executive Officer of Egis in 2001. During his tenure at Egis he headed up
international operations for the Egis Group executive committee, served on its risk management committee, and acted as member and
chairman on the boards of several subsidiaries.
He is a graduate of France’s engineering school, École Nationale des Ponts et Chaussées.
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Paris
New York
Toronto
Istanbul
Luxembourg